Over the past six months, significant updates have been introduced in the Indian tax landscape, effective from October 1, 2024. These changes impact individual taxpayers, businesses, and investors alike. Here’s a summary of the major updates:
- Aadhaar Number Now Mandatory for Tax Filings
Taxpayers must now quote their Aadhaar number in all tax-related documents. The Aadhaar Enrolment ID can no longer be used as a substitute. This change aims to enhance identity verification and improve security in tax filings. - Revised TDS (Tax Deducted at Source) Rates Across Key Categories
The government has reduced TDS rates under several sections to make taxation more favorable for individuals and businesses. Key changes include:
- Life Insurance Payouts (Section 194DA): Reduced TDS from 5% to 2%.
- Brokerage or Commission Payments (Section 194H): TDS decreased from 5% to 2%.
- Individual/HUF Payments (Section 194M): TDS lowered from 5% to 2%.
- E-commerce Transactions (Section 194O): TDS dropped from 1% to 0.1%.
Additionally, Section 194F, which imposed 20% TDS on mutual fund repurchases, has been removed entirely.
- Interest on Government Bonds Now Taxable Beyond ₹10,000
Interest income from government bonds like Floating Rate Savings Bonds, 2020, is now subject to TDS if the annual interest exceeds ₹10,000. This ensures higher-income taxpayers contribute appropriately to tax revenues. - Higher Securities Transaction Tax (STT) on Derivative Trading
To boost revenue from speculative trading, the government has increased the STT on:
- Futures Trades: Now taxed at 0.02% of trade value (up from 0.01%).
- Options Trades: STT raised to 0.1% of the premium (up from 0.05%).
This adjustment reflects the government’s intent to capture more tax revenue from growing derivatives market activity.
- Taxation of Income from Share Buybacks
The tax treatment for share buybacks has shifted. Now, the buyback proceeds are taxed in the hands of shareholders. Companies must deduct TDS at:
- 10% for Residents
- 20% for Non-Residents
This aligns the tax treatment of buybacks with dividend taxation and could influence corporate financial strategies.
These updates reflect the government’s push for more efficient tax administration and equitable contribution from all taxpayers. Taxpayers should stay informed and consult with financial advisors to navigate these changes effectively.
